Floating Debut

First floating-rate Treasury notes sold; touted as 'money-market yields without the headaches.'

The first U.S. floating-rate notes were sold with a high discount margin of 0.045 percent. The spread over three-month Treasury bills, the security’s benchmark, was the same at 0.045 percent. The bid-to-cover ratio, which gauges demand by comparing the number of bids with the amount of securities sold, was 5.67.

“The sale came extraordinarily well,” said Jim Vogel, head of agency-debt research at FTN Financial in Memphis, Tennessee. “The floaters are money-market yields without the headaches. From the beginning, the floaters have had ‘winner’ stamped all over it. And the securities came at the perfect time.”

The debt offers investors a short-term security that’s a hedge against a potential rise in interest rates. The securities are considered short-term because they are benchmarked to a short-term index—the high rate from a 13-week bill. The rate at which interest will accrue on the notes will be re-set daily.

The Treasury plans to sell more floating-rate notes in April, July, and October, with two re-openings in the subsequent months of each quarter.

Investors will bid for $35 billion of five-year securities and $29 billion of seven-year debt Jan. 30.

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